Published:
07-Aug-08
Despite a 2.7 per cent decline in net advertising revenue (NAR) in the first half of 2008, Telecinco bucked the market trend as overall Spanish TV advertising fell 4.1 per cent in the same period.
The broadcaster outperformed main competitor Antena 3 whose NAR declined by as much as 10.8 per cent. While Antena 3's market share consequently dropped by 1.7 per cent to 23.6 per cent, Telecinco slightly increased its share of the Spanish TV advertising pie to 31.4 per cent (+0.5 per cent on the first half of 2007).
In the first half, Telecinco's total revenues were down 1.6 per cent year-on-year to €563m (2007: €572m), of which total advertising revenues made the largest contribution with €520m (92 per cent). Advertising revenues from internet activities and thematic TV channels could post growth of 13 per cent, however, with a total contribution of merely €8.7m, they could not offset the overall downturn. EBITDA fell by 1.5 per cent and net profit after tax was €199m, declining by 10.2 per cent. However, factoring out the net impact of the amortization from the Purchase Price Allocation (PPA) of Endemol, adjusted net profit amounted to €210m, coming close to the €212m over the same period in 2007.
Competitor Antena 3 TV suffered more dramatically as total revenues fell by 12 per cent to €416m. Again, advertising is the biggest contributor with €383m or 92 per cent. Antena 3 also operates a radio business posting €53m but as it was down 7 per cent compared to the same period in 2007, it could not save total group revenues. Including €19m from other operations, total group revenue declined by 11.5 per cent from €539m to €477m. Group EBITDA was down 19.6 per cent to €148m and net profit was dented by as much as 30.9 per cent to €80m.
Audience shares were down for both broadcasters, too, as the Spanish TV landscape gets more fragmented. Telecinco's main channel lost 1.4 per cent on all demographics compared to the first half of 2007 and now has an audience share 19 per cent. Antena 3 fared slightly worse, loosing 1.7 per cent and now posting 16.1 per cent audience share. In prime time, however, Telecinco could marginally increase its audience share by 0.1 per cent to 20.6 per cent whilst Antena 3 again lost 1.8 per cent, now attracting 15.8 per cent of prime time viewers.
Our take...
After years of growth, the Spanish advertising market plunges deeper into recession, holding the TV market firmly in its grip. Only a year ago, the Spanish TV advertising market was still the most vibrant in Western Europe, growing at a staggering 8.7 per cent. This year, Screen Digest forecasts a drop of 6.8 per cent compared to 2007.
In this context, Telecinco claimed in its first half 2008 results, that when the going gets tough, the leader would get going. Indeed, as the biggest Spanish broadcaster in terms of revenue, Telecinco has slightly increased its share of the TV advertising market. However, a closer look at the broadcaster's performance reveals that while ad revenue was only down 0.8 per cent in the first quarter, decline actually gained pace in the April to June period with NAR falling by 4 per cent. The only broadcasters still being able to post positive growth are newcomers Cuatro and La Sexta that are still organically growing in audience and revenues. Cuatro could increase its TV advertising market share by 2.4 per cent to 10.8 per cent and La Sexta claimed +1.5 per cent of the market in the first half of 2008, now holding a 5 per cent share.
Nevertheless, Telecinco's claim still bears some truth as Cuatro and La Sexta are not its main competitors: Screen Digest has previously analysed that these smaller channels, which entered the market in 2005, mainly stole market share from Antena 3. Despite a still healthy advertising market, Antena 3 had plateaued at NAR of €800m between 2005 and 2007 and suffered accelerated audience losses, while Cuatro and La Sexta posted double-digit NAR growth. The advertising recession hitting Spain now further intensifies a trend that already started to take shape back then: By the introduction of new channels, the Spanish advertising market moves to the extremes of one very big and a few small to medium-sized channels. While NAR at Antena 3 and also public broadcaster TVE was still on the same level as Telecinco's in 2004, the gap between Telecinco and its main contenders has since widened and Antena 3 and TVE are further approximating Cuatro and La Sexta. The advertising recession speeds up this process.
Despite their differing performances, Telecinco and Antena 3 are now commonly challenged by three issues. Not only do they have to cope with a depressed advertising market following the economic downturn (1), but there are also two home-made factors that will impact their mid-term performance. Before Cuatro and La Sexta emerged, there was virtually no competition as multichannel audience was very low compared to other countries. The proliferation of DTT (39 per cent of households have DTT primary sets by mid-2008) opens the advertising market to new digital competitors (2). Also, Antena 3 and Telecinco were regularly exceeding the advertising airtime limitations imposed by the EU and the Spanish regulator, driving up revenues. This will be coming to an end as the Spanish regulator plans a stricter revision of advertising airtime rules in the course of the transposition of the Audiovisual Media Directive into Spanish law by December 2009 the latest (3).
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